Industry Analysis

According to Yahoo Finance, Cisco Systems, Inc. (CSCO) is part of the Technology Sector in

the Communication Equipment Industry (Yahoo Finance, (CSCO), n.d.). This analysis will

examine Porter’s Five Forces to provide an analysis of Cisco Systems, Inc., and several of their

competitors. Porter’s Five Forces is a strategic management tool used in business to help

companies shape their strategies. Porter’s theory is that a businesses success is predicated on

how they stand up against their competitors but also based on other factors impacting the

industry that the business operates in to determine its success or failure.

1. Threats of New Entrants. This factor considers that other businesses entering the industry

can pose a threat to a company by taking up some of the market share (De Bruin, 2020).

If there are considerable roadblocks to entering an industry the threat of new entrants

becomes less of a concern. The communication equipment industry is made up of the

giants in this space to include Cisco Systems, Dell Technologies, Juniper Networks,

Oracle Corporation and Amazon Web Services (AWS). A new company entering the

industry would have to spend a large amount of money to market themselves in this very

crowded space. In addition, newcomers would have to spend a considerable amount on

research and development, regulatory requirements and obtain patents for products

(Business to You, 2019).

2. Bargaining Power of Suppliers. This factor considers the amount of cache and power a

company’s supplier has over their ability to produce materials for its products (De Bruin,

2020). This factor considers the number of suppliers out there providing the required

parts and services. As recently as 2020 companies like Cisco have been forced to

reengineer some of their products to overcome component shortages. These challenges

have impacted their ability to fulfill orders for customers (Cooney, 2023). Due to the fact
 that many of the companies providing supplies to Cisco are also providing them for their

competitors provides the supplier with a high degree of leverage and bargaining power

that can create disruption in the market (Cooney, 2023).

3. Bargaining Power of Buyers. This factor looks at how much the consumer can apply

pressure to a company because of the amount of choice they have in service providers.

The more choice that the consumer has to obtain a particular product or service gives

them this leverage (De Bruin, 2020). There are many options for consumers to choose

from when choosing an IT provider. This pressure forces the organization to constantly

be a leader and first to market with new products and services.

4. Threats of substitute products. This factor is of great concern in the communication

equipment industry. This factor provides that a similar product can perform the same or a

similar function to the one your company is selling. In the communications equipment

space, there are other companies that can produce a product like those of Cisco Systems.

There must be differentiators amongst the offerings that makes one company’s products

stand out above the competition. They can be things like price, performance, service, or a

combination of all of these (De Bruin, 2020). These threats are high in IT because of the

digital nature of the business and the ease of doing business internationally.

5. Rivalry among existing competitors. This factor is based on the number of companies

operating in the space, the size and scale of the competition the growth rate in the

industry and the level of product differentiation that exists amongst those involved

(Business to You, 2019, min 3:15). Based on research conducted by the Computing

Technology Industry Association (CompTIA, 2019), the IT industry is worth

approximately $5.2 trillion dollars as of 2019. This industry has seen significant growth

in the last 40 years and has seen significant competition with U.S. companies arise in

India and China (World Top Telecom Equipment Companies by Market Value 2022, n.d.).
 Companies in this industry need sound digital transformation models to compete and to

flourish. The rivalry among the competition is high due to the rise of digital technologies

and the onslaught of e-business (Evans, 2023). Because much of the world has gone

digital and no longer require a physical location to do business this somewhat helps to

push companies in the industry to be first to market in research and development and new

product implementation. Last, due to the amount of capital involved in launching a

business in network communications and equipment the rivalry factor is also high

because of the amount of difficulty that it would take to leave the business (De Bruin,

2020).

Competitive Analysis

Cisco Systems, Inc. is at the top of the industry for computer networking products and

telecommunication solutions. The company also provides software and offers related services.

Cisco’s primary focus over the years has been on Internet Protocol (IP) based networking

technologies, routing and switching products and technology for home networking. Cisco

reported revenue of 49.3 billion in 2020 while boasting a record 11.2 billion in net income

(Morningstar, Inc. March 31,2023). Cisco currently boasts a record 38.7% of the market share

for the ethernet switch and router market. Juniper is another California based IT company that

operates in the same digital networking space as Cisco (Cisco Vs Juniper: Market Share in 2022,

n.d.). They develop networking switches, network management software and network security

products to businesses and consumers. Juniper’s market share is currently at 10.8% in the router

market (Cooney, 2021). Juniper reported 4.4 billion in revenue in 2020 with 257 million in net

income for the same year (Morningstar, Inc. March 31,2023). Arista Networks is a computer

networking company that was started by a former executive who left Cisco Systems in 2004.

This firm designs and sells multilayer networking switches to deliver software-defined
networking for large datacenters and cloud computing. Arista Networks holds 20% of the market

share in the data center switch market which places it in direct competition with one of the

products that Cisco develops (2023b). Finally, Dell Technologies is a well-known developer of

computers and network systems. Where Dell and Cisco compete for market share is in the

development of networking systems. While Cisco has the more recognizable name in the

networking solution arena Dell is becoming a major player in the industry (2023b). When

comparing Cisco and Dell Technologies, the topic of budget or “how much do I have to spend”

will provide recognition that due to Dell’s market share in other aspects of their business they

can price themselves very competitively with Cisco for the comparable technology that they

offer. In some cases that has been reported at up to a 60% savings (Blakey, n.d.). For many

businesses, a reduction in cost must be weighed-up against the work required to move from an

embedded solution which has been in place for years to a new one (Blakey, n.d.). Dell’s

experience in the industry and well-known name brand makes it a strong competitor with Cisco’s

customer base.
When conducting a competitive analysis of these four companies research would suggest that the

top areas of focus should be:

 Brand Reputation  Market Share

 Customer Satisfaction  Innovation of Products and Services

 Continuous Improvement Method  Product Quality

 M&A (Mergers & Acquisitions)  R&D (Research & Development)

Activity Spending

Source: (Barbu et al., 2021) and (Jurevicius, 2022b)

CPM Matrix

Juniper
    Cisco Systems Networks Arista Networks Dell Technologies
Critical Success Factor Weight Rating Score Rating Score Rating Score Rating Score
Brand Reputation 0.08 4 0.32 2 0.16 3 0.24 1 0.08
Market Share 0.13 4 0.52 3 0.39 2 0.26 1 0.13
Customer Satisfaction 0.11 4 0.44 3 0.33 2 0.22 1 0.11
Continuous Improvement
Methods 0.15 3 0.45 4 0.6 2 0.3 2 0.3
Innovation of Products &
Services 0.125 4 0.5 2 0.25 3 0.375 1 0.125
Product Quality 0.14 4 0.56 3 0.42 2 0.28 1 0.14
R&D (research & dev)
Spending 0.17 3 0.51 2 0.34 4 0.68 1 0.17
M&A Activity 0.09 4 0.36 3 0.27 1 0.09 2 0.18
  1.00   3.66   2.76   2.445   1.235

Partial SWOT Analysis (Opportunities & Threats)

A SWOT Analysis is a tool that is used by organizations to benchmark situations in a

business and to use this as a benchmark comparing the performance of its competitors in an

effort to make strategic improvements (Berry & Berry, 2023). This review will examine the

opportunities and threats that impact that networking hardware and software industry in the

current business environment. The opportunities are outside factors that a company and industry

need to be aware of to help maintain profitability. They may also involve looking at areas

previously not explored by other competitors (Valentin, 2001, p.63). As for the threats, these are
things that cause a business to be held back and can stifle their chances to succeed in a particular

market. Threats can be both internal and external factors that can put a business at risk (Berry

&Berry, 2023).

Partial SWOT Analysis: Cisco Systems

Opportunities Threats
Cloud Based opportunities with focus on Cost inflation
SaaS development (software-as-a-service)
Utilization of Artificial Intelligence Threat of new product innovation from
competition
Shifts to Hybrid Work Strong competition and competitive pricing
Increased market development allows more
opportunity in the networking hardware Supply constraints
community
Applications and Workloads are moving Government regulation and increased scrutiny on
closer to users & devices cyber-security
Source: Cisco Systems, Annual Report, 2022

COVID-19 has helped to speed up development in the IT industry and networking space

at lightning speed. Technology has become the driver of the change that will impact the way that

businesses operate into the future (Fowler, 2022b, para 2). Businesses like Cisco will continue to

stay on top of the changes in the industry if they embrace some of the upcoming trends. One of

the biggest threats to the networking hardware industry is the speed of which product innovation

is achieved and the continued focus on privacy and security in our networks (Fowler, 2022b,

para. 7). Cisco Systems is the largest provider of cloud-based network systems and the current

leader in AI technology development. The company expects to see more easing of the supply

chain challenges that plagued much of 2021 and into 2022 and was highlighted as one of the

continued threats to the industry (Cisco Systems, Annual Report, pg. 3). Finally, Cisco plans to

continue developing additional platforms to leverage leading-change technologies (Cisco

Systems, Annual Report, pg. 4).

References:
Cisco Systems, Inc. (CSCO). (n.d.). Yahoo Finance. Retrieved April 3, 2023, from

https://finance.yahoo.com/quote/CSCO/profile?p=CSCO

De Bruin, L. (2020, December 5). Porter’s Five Forces. B2U - Business-to-you.com.

https://www.business-to-you.com/porters-five-forces/

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[Video]. YouTube. https://www.youtube.com/watch?v=Dfp23xSqpdk

World Top Telecom Equipment Companies by Market Value 2022. (n.d.).

https://www.value.today/world-top-companies/telecom-equipment-companies-world

Evans, N. D. (2023, February 3). How digital business disrupts the five forces of industry

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perspective-of-porters-five-forces-framework.html

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%20have%20caused,and%20deliver%20products%20to%20customers.

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2022

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https://www.networkworld.com/article/3623822/10-competitors-cisco-just-cant-kill-

off.html

Morningstar, Inc. (2023, March 31). Morningstar, Inc.

https://www.morningstar.com/stocks/xnas/csco/financials

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%20to%20Dell'Oro%20Group.

Barbu, A., Militaru, G., Deselnicu, D. C., & Catana, S. (2021). Key Success Factors That Enable

IT Service Providers to Achieve Organizational Performance: Evidence from Romania.

Sustainability, 13(19), 10996. https://doi.org/10.3390/su131910996

Jurevicius, O. (2022b, August 16). Competitive Profile Matrix (CPM). Strategic Management

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Blakey, J. (n.d.). Cisco vs Dell Networking: A Review. https://www.lan3.co.uk/blog/cisco-vs-

dell-networking-a-review

Berry, T., & Berry, T. (2023, March 13). How to Do a SWOT Analysis for Better Strategic

Planning. Bplans Blog. https://articles.bplans.com/how-to-perform-swot-analysis/

Fowler, G. (2022, March 10). Five Tech Trends That Will Impact Businesses In 2022 And

Beyond. Forbes.

https://www.forbes.com/sites/forbesbusinessdevelopmentcouncil/2022/03/10/five-tech-

trends-that-will-impact-businesses-in-2022-and-beyond/?sh=457181db4058

Valentin, E.K. (2001). SWOT Analysis from a resource-based view. Journal of Marketing.

Spring 2001, 54-68. Article retrieved free via UMGC Library (login
required): http://ezproxy.umgc.edu/login?url=https://search.ebscohost.com/login.aspx?
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